Snook’s Look: The housing connection
By Andrew SnookFeatures Business Intelligence Government and regulatory
Will residential construction help boost the rental sector?
Almost every industry in Canada struggles with the same challenge: labour shortages. The government of Canada responded by stating that it would increase immigration levels significantly between 2023 to 2032 and welcome an estimated 4.45 million new immigrants into the country during that time frame.
While the country is certainly in need of an influx of labour (especially skilled labour), this generates another challenge for the federal government – one that could be a great opportunity for the construction sector and equipment rental companies. To bring in millions of new immigrants you need a place to house them, and reasonably priced housing is currently in very short supply in the country’s major urban centres, which is where most of these new immigrants would be headed in search of employment.
So, how does Canada make housing more affordable for people? According to the Canada Mortgage and Housing Corporation (CMHC), it’s the simple matter of increasing supply. A recent CMHC report stated that Canada would need to build 3.5 million more units (in addition to what is already scheduled to be built) to bring prices to affordable levels. It was estimated that about 60 per cent of the 3.5 million additional units would need to be built in Ontario and B.C. (Quebec and Alberta are also expected to need significant amounts of new housing).
The 3.5 million housing gap target isn’t even the worst-case scenario, according to the CMHC. In a report released this year, “Housing shortages in Canada: Updating how much housing we need by 2030,” it stated: “Our high-population-growth scenario examines what will happen to the housing supply gap if current immigration trends continue to 2030. In short, we find that the gap would increase from 3.5 million to 4 million housing units. This is because the higher population, and larger pool of income it brings, increase demand for housing. Our low-economic-growth scenario looks at what will happen if economic growth is weaker than in our baseline scenario and current immigration policies end in 2025. In this case, we find that the housing supply gap falls to 3.1 million units.”
If you’re wondering how big a challenge this would be for Canada’s residential construction sector to overcome, take a look at the five-year housing statistics between 2018 to 2022 from Statistics Canada. Over that time, there were 1,172,455 units started for a five-year annual average of 234,491. To meet the low end of the 2030 affordability targets (3.1 million units) between 2023 to 2030, the industry would need to average 387,500 housing completions units per year (in addition to what is already being built). For the industry to hit the 4 million units target, that number jumps to 500,000 units per year – more than double the rate from 2022.
While these housing targets look a little like wishful thinking by the CMHC, the government of Canada is aware that this is a hot-button issue and have deployed multiple initiatives to fast-track new residential construction. It is throwing money at the problem in the form of direct subsidies and GST forgiveness. Provinces are doing even more, each in their own ways.
Will these initiatives and others be enough to meet CHMC’s targets for housing units across Canada? Not likely. Even with financial incentives, the residential construction sector still needs to overcome increased costs of building supplies and labour, a shortage of labour and navigating its way through a sea of municipal, provincial and federal government red tape. Will making it easier for the construction sector to build new homes through these initiatives be beneficial to the residential construction and equipment rental sectors? Probably. More housing to build each year means more equipment will be needed. So even if the CMHC’s targets are pie in the sky, both sectors should still benefit in the end.
Andrew Snook is the former editor of Rock to Road, Crane and Hoist and On Site.
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